1. Prepare a SWOT analysis for the Eusebius Omnibus Corporation case below.
2. Using the 5-forces model below, explain how your organization uses these competitive forces for strategic planning.
3. How do goals and plans differ? Explain some of the types of plans associated with management and how these might be used in your organization.
Eusebius Omnibus Corporations�A case study and experiential exercise
Ted W. Farcasin, Ph.D.
Eusebius Omnibus Corporation (EOC) is a multimillion dollar information diffusion firm with corporate headquarters in a large Midwestern city. The mission of the company is to provide state of the art information to health care agencies through publications, public speaking programs and videotape productions. Large government agencies to small community health organizations have utilized EOC�s services. The company has been in business for fourteen years; currently is the market leader with 47 percent of the market; operates three divisions, each with its own specialization, such as the production of videotape presentations that promote behaviors that improve public health and combat socially transmitted diseases; and employs over 150 clerical, technical, and professional personnel.
The CEO has been with the company since its inception and is regarded as a visionary, competent leader, excellent planner, innovator in product development, person of high moral standards, and effective decision maker, and he is esteemed by peers and clients across the business community. He has formulated an executive constellation of three vice presidents who report directly to him. He has empowered these VPs to be responsible for the internal operations of the company and to assist him in long-range strategic planning. Lately, the CEO have been concerned about his own health, threats to market share by increasingly stiff competitors, and the introduction of new product lines by competitors.
EOC is known across the industry as having the finest products available in the information diffusion field. Its video productions, sold under the label of Omicron Filmation, have been used by such large health agencies as the National Association of Internists and University Residents (NAIUR) and the President�s Commission on Health care Delivery (PCHCD). This form of information diffusion is expected to grow at an annual rate of 9.75 percent over the next six years. Tapes have been produced in the company�s own studio using 1-inch video formats. The company owns three studio-quality cameras, each initially costing $75,000. Each tape that is made can be reproduced in either �-inch or �-inch format depending on the demands of the consumer. The average cost of producing a single new video is $5,500. This expenditure includes the use of a five-person production crew who can follow a production from the beginning stages of script writing to the final point of product distribution. Omicron has to sell ten tapes at a cost of $550 each to break even or negotiate contracts with clients to produce products that they want but at a higher cost to the end user. On the average, Omicron has to run ten crews a week, 48 out of 52 weeks a year to generate an annual 21 percent return on investment and a 7 � percent net return on profits.
However, this business unit generates 69 percent of EOC�s total revenue of $11,573,000 dollars and employs 48 percent of EOC�s personnel. Recently, a consortium of new video producers, called �Tapeheads Incorporated,� has purchased advanced technology that allows it to produce the same high quality videos as the Omicron for 57 percent less in average cost expenditures. Savings from this production are passed on to consumers causing long-standing EOC clients to start contracting with this new enterprise. EOC would have to restructure Omicron substantially to take advantage of this new equipment. For example, the same product can be produced by the consortium with a two person crew as opposed to five, and these new competitors only lease studio space as opposed to owning it as does EOC. Fred B., VP of Operations for Omicron, estimates that the unit could restructure, but it would take five years before it would be competitive with Tapeheads. Finally, these new competitors annually produce one production a year for a worthy charity. This does not generate any revenue but does give them a tax-write off and substantially improves their image among clients and other members of the community. EOC does not have such a policy.
The Public Speaking unit EOC provides seminars to health agencies on topics that meet their internal demands. Programs are designed by a staff of professional, technical and clerical personnel that comprises 27 percent of EOC�s total personnel and generates 11 percent of the company�s total profits. Many of these programs have been successful for a large number of clients; thus, net profits on public speaking engagements average 29 percent. There are no new competitors in this market, and growth forecasts have stabilized at 3.43 percent per year. Susan H., VP of Operations has submitted a five-year strategic plan to the CEO, suggesting that while there will always be a market for public speaking, her unit must begin to develop new product lines and diversify, if it is to remain a profitable contributor to the EOC�s financial well-being.
Distributing information through the printed media is EOC�s oldest and most profitable business unit. Herman I., VP of Operations for the unit, has indicated that printing and publications account for 20 percent of total corporate profits. Net operating profits for the unit are at an all-time high of 43 percent, duo to debt-free operations, and little turnover in technical or clerical staff, high productivity, and quality products that meet the needs of a few large consumers, such as the US Department of Health Services. The unit has long-term contracts with such agencies that will remain viable for at least five years. Moreover, while the VP also reported that printing is a volatile industry and fluctuates with business cycles, his current customers have acknowledged that his products are the best in the industry and cannot be matched in cost or quality by any other supplier. There are three strategic scenarios for this unit. One, if the economy picks up and averages 5 percent growth in GDP over the next five years, the printing unit will contribute 34.7 percent to total profits. Two, if the economy averages 3 percent growth over the next five years, the unit will contribute 22 percent to total revenues. Finally, if the economy averages only 1.75 percent growth over the next five years, the unit will contribute only 9.83 percent to total revenues.
Potential needs of new clients are shifting from print media to other forms of information diffusion, due to literacy problems. Clients are gaining bargaining power with this unit due to the numerous alternatives coming on the market that can replace print media. One competitor, a recycler of medical waste products, has found a vendor that can provide it with holographic images of the same material provided by EOC. This form of information dissemination is more expensive than printed documents, but costs are declining as the technology is perfected. Holographics have the advantage of being interactive and significantly more enjoyable to view than publications. The major disadvantage of holographics is their low Mean Time Between Repairs (MTBR), averaging only 93.4 hours, and the maintenance contract is $3,500 per year. Printing technology has a MTBR average of 25 months, and the maintenance contract is $275 per year.
The advantage of printed media is that they can be easily distributed to all members of an organization quickly and cheaply. EOC�s pri9poting unit does offer clients sliding price scales, the greater the volume the cheaper it is for customers to purchase printed materials. Overnight mailings facilitate �on demand� delivery of products. No other competitor in the industry can match this strategy or the unparalleled product and service offered by the printing unit of EOC. Moreover, the VP for this unit is regarded as the most effective manager at EOC. He strategizes well and has an excellent ability to design systems that motivate, satisfy, and bring out the best in productivity and with the fewest errors from employees. He is highly respected by the CEO, as well as his peers, subordinates, and customers. The trust and responsiveness to client needs that he has established over the years bring in a higher percentage of dollars to the unit that planned marketing efforts.
A few months ago, the CEO received a phone call from a group of New York City investors. They played their trump card immediately, an outright buyout offer of $23,700,000 for EOC. In the proposed buyout, current employees would be offered either positions in the new organization, without guarantees of the same job but with equivalent wages, or lucrative retirement packages. The CEO�s intuitive response was: �Visionaries die hard, we have new products on the horizons in diverse markets, we�re financially solvent,� �ouch,� that chest pain is still bothering me.� Furthermore, he has heard of such offers in the past; most of them have been attempts to buy off one of the business units. The CEO has filed these inquiries.
5 Forces Model
1. Threat of new entrants. How likely is it that new competitors will come into the industry?
2. Threat of substitutes. How likely is it that other industries� products can be substituted for our industry�s products?
3. Bargaining power of buyers. How much bargaining power do buyers (customers) have?
4. Bargaining power of suppliers. How much bargaining power do suppliers have?
5. Current rivalry. How intense is the rivalry among current industry competitors?